Stamp duty has been cut across the board and halved on homes worth less than £100,000, following the implementation of the Bacon Report into house prices. The Government has also announced measures which will ensure investors will now have to pay stamp duty on new homes.
The Minister for Finance, Mr McCreevy, will move a financial resolution in the Dail on Tuesday to implement the stamp duty changes and will also introduce a special Finance Bill to legislate for all taxation changes.
The measures are designed to allow first-time buyers easier access to the market, and to free up some second-hand homes for sale. The decision to make stamp duty payable for investors in new homes is designed to ensure prices in this area are not driven too high by investors. New homes recently released in west Dublin were snapped up by investors making multiple purchases, underlining the need for the Government to take action. According to the Minister of State for Housing and Urban Renewal, Mr Robert Molloy, some of these practices were "immoral" and the measures will introduce some balance to the market. The lower rate of stamp duty will apply to conveyances dated from yesterday. Investors who have already entered into a contract for a new house or apartment will have to finish the conveyancing before September 30th, or stamp duty will be applied.
Anyone applying for exemption from stamp duty for new houses will have to undertake to occupy the house for at least five years. If the property is rented in that time they will liable for stamp duty.
In his report, economic consultant Dr Peter Bacon recommended a top rate of 5 per cent on homes up to £500,000. However, the Government chose to increase this to 7 per cent on homes over £250,000 to pay for a bottom rate of 3 per cent on homes worth between £60,000 and £100,000.
According to Mr Molloy, the reductions in stamp duty are not a giveaway gesture by the Government.
"High stamp duty rates had become a significant bottleneck to market mobility, a distorting factor between new and second-hand houses and a particular barrier to entry to the second-hand market by first-time buyers." The reduced rates will help increase supply and increase the options for first-time buyers, he added.
Dr Bacon said the relatively small cuts in stamp duty at the top end of the market will encourage existing homeowners to trade down.
Older couples will have an incentive to move into apartments or out to the country, thus freeing more second-hand homes for sale.
However, it is questionable whether stamp duty at 7 per cent for homes over £250,000 will encourage many more to trade upwards.